The Government has proposed to raise tax on imported starch.
“To protect local producers of starch from competition from imported starch, we have proposed to increase import duty from 25% to 35%,” said finance state minister (general duties) Henry Musasizi, in a statement presented to the finance committee of Parliament on tax Bills.
He added that the proposed tax will be considered at regional level during the next East African Community pre-budget meetings.
Addressing Parliament in Gulu in August last year, President Yoweri Museveni informed MPs that he had ordered for the scrapping of the 18% Value Added Tax (VAT) on locally produced starch and the imposition of a high import duty on imports to protect local manufacturers.
He said the Government was promoting cassava growing in northern Uganda and Teso sub-region.
“However, the production has increased and two mistakes were made without the knowledge of the finance ministry. They imposed an 18% tax on locally produced starch and did not impose any on imports. When I got the information from the local factory owners, I ordered that the tax be removed and a higher import duty be put on imported starch. This way, the processors will upscale the production and more cassava will be purchased,” the President explained.
He said farmers can earn about sh12m from an acre of cassava each year.
Museveni, however, demanded to know why work on Acholibur factory was moving at a slow pace. MP Anthony Akol (Kilak North) informed him that the factory could not take off due to lack of funds.
“The Government budgeted for the factory, but when the appropriation Bill was returned to Parliament, the money was removed,” Akol said.
While opening a cassava starch factory in August last year in Butebo district, Museveni urged farmers to produce more cassava, a raw material for starch production.
“We have a young pharmaceutical industry (making medicines). Making tablets, for instance, needs high-grade starch. This is now being imported from China and India. This cost adds 7% to the cost of medicine per unit, moreover, in foreign currency,” Museveni said.
While appearing before the finance committee of Parliament on April 11 this year, stakeholders in the agro-processing sector appealed to the Government to increase the import duty on starch to 35%.
Led by Ramesh Babu, the founder of pharmaceutical company Abacus, based in Mukono district, the stakeholders told the committee chaired by Amos Kankunda (Rwampara County, NRM) that the increase would protect the local starch producers from competition.
Kelly Wanda, the chairperson of the National Cassava Platform of Uganda, said the current 10% import levy has failed to tame the influx of cheap starch imports from countries such as India, Egypt and Thailand, which has made local starch uncompetitive.
Since 2023, Babu has been running a cassava starch processing plant known as PURA Organic in Nakasongola district.
The firm supplies products across East Africa. While the demand for Ugandan starch remains limited, especially in European and Chinese markets, Babu said operational costs remain high.
“One kilogramme of cassava for processing needs 6lts of water. If I want to process 100 tonnes, I need water worth sh600,000,” Babu explained.
While some factories are lucky to produce their own power using bio-digesters, other sector players such as Rebecca Namugwanya, who is engaged in high-quality flour production, contend that energy remains a key challenge.
The current VAT Act specifies that grains and cereals grown and milled in Uganda are zero-rated.
However, Namugwanya said they also want root crops added for fairness. Furthermore, she appealed for a change of policy on wheat.
“In Uganda, we import a lot of wheat. We can have wheat blended with high-quality cassava flour for all Ugandans and that is going to keep them healthy,” Namugwanya said.
Additional reporting by Dedan Kimathi
LEAD PHOTO CAPTION: Employees of Lukonge Cotton Company Limited, a cassava starch and cotton lint processing plant in Jinja. The Government has proposed to raise tax on imported starch to stem competition faced by local producers
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